Institutional Shareholder Services (ISS) has settled charges with the U.S. Securities and Exchange Commission (SEC) after failing to safeguard the confidential information of clients participating in a number of proxy contests.
The company will pay US$300,000 and retain an independent compliance consultant.
An SEC investigation found that an ISS employee provided a proxy solicitor with material, non-public information showing how more than 100 ISS institutional shareholder advisory clients were voting their proxy ballots.
In exchange for voting information, the employee was provided with meals, expensive tickets to concerts and sporting events, and an airline ticket.
The breach, which occurred from about 2007 to 2012, was made possible in part because ISS lacked sufficient controls over employee access to confidential client vote information.
The employee, who now no longer works at ISS, gathered the data by logging into the ISS voting website from home or work and using his personal email account to communicate details to the proxy solicitor.
“Proxy advisors must tailor their controls based on the risks of their particular business in order to protect the integrity of the proxy voting process,” says Julie M. Riewe, deputy chief of the SEC enforcement division’s asset management unit. “The internal controls at ISS did not adequately address the potential misuse of confidential proxy voting information by firm employees.”